_Crude Oil, Gold Sink as Euro Crisis Fears Grip Financial Markets

14 May 2012 09:00 GMT Talking Points
Crude Oil, Copper Follow Shares Lower on Greek-Linked Risk Aversion Gold and Silver Sold as US Dollar Rides Haven Demand to 2-Month High Commodity prices are trading broadly lower in European hours as Greece-linked jitters continue to weigh on risk sentiment trends. Growth-sensitive crude oil and copper prices following stocks lower while safe-haven flow buoy the US Dollar, applying de-facto downward pressure on gold and silver.
Lawmakers in Athens once again failed to come to terms on the structure of a ruling coalition at a meeting over the weekend. Markets are becoming increasingly concerned that a lingering impasse will push Athens to fall short of its obligations under the terms of the EU/IMF bailout, paving the way for Greece’s ejection from the Eurozone and possibly even the overall EU.This would be an unprecedented development with effectively unpredictable practical implications for financial markets, fueling a broadly defensive tone
S&P 500 stock index futures are pointing sharply lower ahead of the opening bell on Wall Street, arguing for more of the same as North America comes online. The US economic calendar is empty, putting the spotlight on a meeting of Eurozone Finance Ministers in Brussels. Traders on the lookout for any clues about a possible way forward beyond the Greek political stalemate.
WTI Crude Oil (NY Close): $96.13 // -0.95 // -0.98%
Prices are testing through support at 95.41, with a confirmed break exposing the December 16 low at 92.51. Near-term resistance lines up at 96.57, the 100% Fibonacci expansion level. A break above this barrier exposes the 76.4% Fib at 98.87.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1579.40 // -14.62 // -0.92%
Prices are testing through support at 1570.22, the 61.8% Fibonacci expansion level, with a break below that exposing the measured target implied by the Triangle pattern carved out since late March at 1548.21. For the time being, initial resistance is marked by the 50% Fib at 1591.15.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $28.91 // -0.15 // -0.52%
Prices are testing through support at 28.70 marked by a horizontal barrier as well as the bottom of a falling channel established since early March. A confirmed break on a daily closing basis exposes 27.06 as the next downside objective. Near-term resistance remains at 29.71 for the time being.
Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.648 // -0.042 // -1.14%
Prices took out rising trend line set from early October and are now testing though the 50% Fibonacci retracement at 3.606. A break below this boundary exposes the 61.8% level at 3.516. The trend line, now at 3.650, has been recast as near-term resistance.
Daily Chart - Created Using FXCM Marketscope 2.0

TradeTheNews.com European Market Update: Moody's outlook on financial institutions weighs upon risk appetite

 Thursday, February 16, 2012 5:48:34 AM

***Economic Data***
- (EU) ECB: €755M borrowed in overnight loan facility v €1.2B prior; €391.6B parked in deposit facility vs. €524.0B prior
- (RU) Russia Gold & Forex Reserve w/e Feb 10th: $509.1B v $507.3B prior
- (EU) Euro Zone Jan EU 25 New Car Registrations: -7.1% v -6.4% prior
- (CZ) Czech Jan CPI M/M: 1.8% v 1.4%e; Y/Y: 3.5% v 3.2%e
- (ES) Spain Q4 Final GDP Q/Q: -0.3% v -0.3% prelim; Y/Y: +0.3% v +0.3% prior
- (TR) Turkey Jan Consumer Confidence: 92.2 v 92.0 prior
- (SE) Sweden Central Bank (Riksbank) cut the Repo Rate by 25bps to 1.50%; as expected
- (NL) Netherlands Jan Unemployment Rate: 6.0% v 5.9%e
- (SE) Sweden Jan CPI Headline Rate M/M: -0.9% v -0.5%e; Y/Y: 1.9% v 2.3%e; CPI Level: 311.85 v 312.97e
- (SE) Sweden Jan CPI Underlying (CPIF) M/M:-0.7 v -0.5%e; Y/Y: 0.9% v 1.1%e
- (IT) Italy Dec Total Trade Balance: +€1.5B v -€1.6B prior; Trade Balance EU: -€577M v -€389M prior
- (NO) Norway Q4 GDP Q/Q:0.5% v 0.4%e; GDP Mainland Q/Q: 0.6% v 0.5%e
- (PL) Central/Eastern European Jan ZEW Indicator: -19.5 v -26.6 prior
- (IT) Italy Dec Current Account: +€402M v -€3.5B prior
- (BR) Brazil Dec Economic Activity Index M/M: 0.6% v 0.6%e; Y/Y: 1.5% v 1.6%e

Fixed Income >- (ES) Spain Debt Agency (Tesoro) sold total €4.07B vs. €3.0-4.0B indicated range in 2015 and 2019 Bonds
- Sold €733M in 4.4% Jan 2015 Bono; Avg Yield 2.966% v 4.984% prior; Bid-to-cover: 4.37x v 2.40x x prior; Maximum Yield set at 3.126% v 5.050% prior
- Sold €2.27B in 4.0% July 2015 Bono ; Avg Yield 3.332% v 2.861% prior; Bid-to-cover: 2.19x v 1.63x prior; Maximum Yield 3.470% v 2.989% prior
- Sold €1.07B in 4.30% Oct 2019 Bono; Avg Yield 4.832% v 5.352% prior; Bid-to-cover: 3.27x v 2.13x prior; max yield 4.899% v 5.371% prior
- (FR) France Debt Agency (AFT) sold approx €8.45B vs. €7-8.5B indicated range in 2014, 2015 and 2017 BTAN
- Sold €2.09B in 3.0% July 2014 BTAN; Avg Yield 0.89% v 1.05% prior; Bid-to-cover: 2.36x v 2.10x prior
- sold €1.335B in 2.5% Jan 2015 BTAN; avg yield 1.09% v 1.75% prior; Bid-to-cover: 3.30x v 2.07x prior
- Sold €5.02B in 1.75% Feb 2017 BTAN; avg yield 1.93%; Bid-to-cover: 1.99x (First tap of issue)
- (UK) DMO sold £1.75B in 4.5% Sept 2034 Gilts; avg yield 3.122% v 3.955% prior; Bid-to-cover: 1.62x v 2.23x prior; Tail 0.9bps v 0.3bps prior
- (HU) Hungary Debt Agency (AKK) sold HUF50B vs. HUF50B Targeted in 12-Month Bills; Avg Yield 7.69% v 7.85% prior; Bid-to-cover: 1.58x v 1.97x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China FDI declines for the third straight month
- Australia Jan Unemployment Rate better than expected
- Moody's warned it may cut the credit ratings of 17 global and 114 European financial institutions
- Greek drama continues to be played out with next Monday, Feb 20th as the next key date
- ECB Borrowing below the €1.0B level for the first time since Sept 2011
- Spanish government three-tranche bond auction was 'solid'

Equities: >FTSE 100 -0.70% at 5850, DAX -1.2% at 6680, CAC-40 -0.60% at 3369, IBEX-35 -2.5% at 8521, FTSE MIB -1.6% at 16,243, SMI -0.30% at 6182

- European equity indices opened the session lower, weighed down by corporate earnings and Moody's warning that it might downgrade more than 100 European banks.
- In individual movers, SocGen [GLE.FR] has declined by over 2% following earnings and amid broad weakness in European banks. Automaker Renault [RNO.FR] has gained more than 3% after reporting full year results. EDF [EDF.FR] is lower by over 3% following its earnings report. Also in France, insurer Axa[CS.FR] has lost over 3% following its earnings report. In Switzerland, Zurich Financial [ZURN.CH] is down over 1%, after reporting a weaker than expected Q4 net profit and a y/y decline in its return on equity. Nestle [NESN.CH] is higher by over 1% after reporting results and issuing 2012 guidance. UK-listed defense company, BAE Systems [BA.UK] is lower by over 2%, following the release of its full year results. Kingfisher [KGF.UK] is down by more than 1% after issuing its Q4 trading update. In Amsterdam, Akzo Nobel [AKZA.NL]has advanced over 5% following its Q4 results. Randstad Holding [RAND.NL] is down by more than 6% after reporting weaker than expected Q4 results.

Speakers: >- Greece PM Papademos said to be meeting with PASOK, ND officials today
- Greece Fin Min said to downplay escrow account demand as 'technical issue' and accept stepped-up loan oversight. No concerns over possible loan delay
- Swedish Central Bank commented after it cut the repo rate by 25bps that the country's economic slowdown had been more severe than expected with growth likely to be low in period ahead with rising unemployment. It noted that considerable uncertainty about economic developments abroad but that the Swedish economy to grow at more normal rate in 2013
- China Central Bank (PBoC) Vice Gov commented that it promised to prevent systemic and regional financial risks and carefully monitor risks in local banks and private lending market.
- China state researcher Fan Jianping commented that an interest rate cut by China was not very likely this year, not likely to cut RRR in Q1. He also noted that China might set its lowest growth target in eight years between 7.0-7.5%
- World Gold Council stated that 2011 Global gold demand was at 4,067.1 tons, +0.4% y/y and that the long term fundamentals remained strong on rising demand and tight supply. Global demand was valued at $205.5B compared to $159.5B in 2010 period and the value topped $200B for the first time ever. Strong investment demand drove 2011 with 1,640.7 tons, +5% y/y with China demand at 769.8 tons, +20% y/y. The WGC noted that Chine would likely to surpass India as the largest buyer in 2012
- EU Trade Commissioner de Gucht commented that Europe-China trade was becoming more balance and the trade gap was narrowing
- Hungary Central Bank Gov Simor: must pursue-market friendly economic policies to improve investor confidence to assure economic growth. He stressed that restoring investor trust was essential for Hungary to reduce its debt levels in the long-term. Government needed to act and encourage banks to boost their lending. Central banks must focus on primary mandate and secure a stable economic environment and that monetary easing might pose financial stability risk
- Hungary Central Bank members Gerhardt and Kocziszky (rate setters) commented that the central bank should hold rates steady until country reaches deal with EU/IMF on precautionary loan. The IMF agreement would strengthen the case for monetary policy easing and that the govt was clearly committed to EU/IMF deal
- Japan Econ Min Furukawa: Gov't thinking along the same lines as those of BoJ's regarding prices
- Iran's letter to EU official was said to have proposed early resumptions of nuclear discussions with leading nations

Currencies:
- The JPY was mixed against the major pairs. The USD/JPY hit a 3 month high. Dealers continue to note that the 78.30 remained pivotal support in the pair and the level held despite the drop in the EUR/JPY cross over the Greek debt concerns. The 78.30 level represented the upper end of a prior three-month trading range and should act as support. Interestingly dealers noted that FX intervention would be 'more effective' for the BOJ when the technical picture was favorable and more conducive for success. Above the 78.30 level would start to provide such a favorable environment with 80.30 being even more important level.
- The EUR/USD probed below the 1.30 handle with continued headwinds from the Greek situation. The recent spat of weakness started on Wednesday after press reports circulated that EU finance officials were said to be looking at proposals to delay all or part of the Greek bailout. During today's session Netherlands Fin Min de Jager reiterated the view that Greece had not met all the conditions (Greece says it did). Monday

Political/ In the Papers:
- The FT reported on the possible shifting sentiment towards a Greek default by some German, Dutch and Finnish officials. A senior euro zone government official was quoted as saying, 'It would have led to a credit crunch immediately and hurt us all; Now, the odds [of such a catastrophic impact] are something like 10-20%. It's still possible, but it's not a certainty'. The German Finance Minister Schaeuble hinted that Greece might postpone its elections and put in place a technocratic government free of all political parties to put in place the bailout program.
- The FT noted economists were split on whether or not the EU can survive a Greek default. Belgium think tank Bruegel's Wolff stated a default that was orderly and kept Greece inside the euro zone could prove manageable. But if Greece were to leave the euro, there could be serious contagion. In contrast, the Centre for European Policy Studies (CEPS) Gros said he has concerns that policymakers were persuaded into a false sense of security by ECB president Draghi's cheap loans.
- The Irish Debt Agency (NTMA), on its road show in Asia, is looking to return to the debt markets in late 2012, or early 2013. The agency reported that the road show so far has had positive response. In the past, NTMA officials have said that Ireland was fully funded through 2013. Also, the Irish Finance Minister Noonan said last December that he was hopeful the country would return to the bond market by mid-2013, and wanted the NTMA to step up issuance in the short-term market in H2 of 2012.
- Following yesterday's release of UK unemployment data, Sky News provided additional insight into the UK labour market. The unemployment count at 2.67M follows an increase of eight consecutive months. The number claiming Jobseeker's Allowance increased for the 11th straight months. It has been three years since unemployment exceeded the 2M mark. The Chartered Institute of Personnel and Development (CIPD) chief economist Philipott informed Sky News that while the figures for the last three months of 2011 were not as bad as expected, 2012 was going to be a tough year. He added, 'The problem for 2012 is that most analysts, including ourselves, expect the economy to grow very slowly at best and that will inevitably lead to rising unemployment'.

***Looking Ahead***
- (NL) Netherlands Debt Agency (DSTA) to sell $2.0B indicated in 1.0% 2017 bond via syndicate; Order book currently over $4.0B; guidance around 10bps over mid-swaps
- 6:00 (PT) Portugal Q4 Unemployment Rate: No est v 12.4% prior
- 6:00 (PL) Poland to sell Bonds
- 6:00 (FR) France Debt Agency (AFT) to sell €1.3-1.8B in Linkers
- 8:00 (PL) Poland Jan Employment: M/M: 1.0%e v -0.2% prior; Y/Y: 1.1%e v 2.3% prior
- 8:00 (PL) Poland Jan Avg Gross Wages M/M: -11.5%e v +9.0% prior; Y/Y: 4.8%e v 4.4% prior
- 8:00 (RO) Romania to sell Bonds
- 8:30 (CA) Canada Dec Int'l Securities Transactions: C$10.0Be v C$15.0B prior
- 8:30 (CA) Canada Dec Manufacturing Sales M/M: 2.0%e v 2.0% prior
- 8:30 (US) Jan Producer Price Index M/M: +0.4%e v -0.1% prior; PPI Ex Food & Energy M/M: 0.2%e v 0.3% prior >- 8:30 (US) Initial Jobless Claims: 365Ke v 358K prior; Continuing Claims: 3.49Me v 3.515M prior
- 8:30 (US) Jan Housing Starts: 675Ke v 657K prior; Building Permits: 680Ke v 671K prior (revised from 679K)
- 9:00 (MX) Mexico Q4 GDP Q/Q: 0.8%e v 1.3% prior; Y/Y: 3.7%e v 4.5% prior; 2011 Annual Growth Rate: 4.0%e v 5.45 prior
- 9:00 (MX) Mexico Dec Global Economic Indicator: 3.6%e v 3.8% prior
- 10:00 (US) Q4 Mortgage Delinquencies: No est v 7.99% prior; MBA Mortgage Foreclosures: no est v 4.43% prior
- 10:00 (US) Feb Philadelphia Fed: 9.0e v 7.3 prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 10:00 (US) Treasury Sec Geithner testifies on 2013 budget
- 10:00 (US) Fed's Kamin (non-voter)
- 11;00 (US) Treasury 2-year, 5-year and 7-year Note refunding announcement
- 11:00 (US) Fed to purchase $1.5-2.0B in Notes
- 12:00 (NO) Norway Central Bank (Norges) Gov Olsen's Annual Address >- 13:00 (US) Treasury to sell 30-Year TIPS
- 15:00 (US) Fed Chairman Bernanke on community banking
- 16:00 (CO) Colombia Dec Trade Balance: $100.0Me v $71.1M prior

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Extracting Silver from the Clouds of the Global Financial Crisis

We can pretend as much as we want that our current way of life is sustainable, but that doesn’t make it so. Even while I drive on the highway, I sometimes wonder, “If gas prices go up to $5 per gallon, how many fewer cars are there going to be on the highway?” I cannot speak for all Americans, but I know in the Midwest, oftentimes rush hour can be unbearable — that is when unemployment is relatively high. One has to wonder how much more crowded the highways would be if unemployment went down to around 4 percent.

These sentiments regarding gas prices extend to many sectors of the economy including (but not limited to) unemployment, higher education, the legal system, the prison system, health care, food consumption, developing technology, material goods, and labor. In addition to the aforementioned issues, the threats of war, societal unrest, climate change, and international terrorism make for quite an ominous global situation. One has to wonder if the problems are systemic. From a macrohistorical perspective, even political and economic leaders are seeing problems with the global economic system — in particular, the capitalist free-market model.

Extracting Silver from the Clouds of the Global Financial Crisis

We can pretend as much as we want that our current way of life is sustainable, but that doesn’t make it so. Even while I drive on the highway, I sometimes wonder, “If gas prices go up to $5 per gallon, how many fewer cars are there going to be on the highway?” I cannot speak for all Americans, but I know in the Midwest, oftentimes rush hour can be unbearable — that is when unemployment is relatively high. One has to wonder how much more crowded the highways would be if unemployment went down to around 4 percent.

These sentiments regarding gas prices extend to many sectors of the economy including (but not limited to) unemployment, higher education, the legal system, the prison system, health care, food consumption, developing technology, material goods, and labor. In addition to the aforementioned issues, the threats of war, societal unrest, climate change, and international terrorism make for quite an ominous global situation. One has to wonder if the problems are systemic. From a macrohistorical perspective, even political and economic leaders are seeing problems with the global economic system — in particular, the capitalist free-market model.